The Road Ahead in Fraud and Loss Prevention


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The COVID-19 pandemic brought fraud and cybercrime to the fore as losses to businesses and consumers skyrocketed. This was spurred by several factors, but primarily due to the significant growth in online transactions and data sharing that occurred during the pandemic.

According to findings by the UK’s Justice Committee in 2022, “fraud now accounts for 40% of reported crime in the UK, increasingly facilitated by online methods, and another 25% growth in these crimes is anticipated in the coming years.” The US National Retail Federation also reported that theft and shrink cost the US retail industry $94.5 billion in 2021.
Fraud and loss prevention have therefore understandably become major concerns for businesses.

In this article we take a look at the technical and organisational measures that businesses are using to counter fraud and loss, and we consider what lies ahead in this crucial area.


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Where Are We Now with Fraud and Loss Prevention?

Loss is significant in any industry, but it is particularly the case in the retail industry where margins are tight, and the financial services industry where losses can equate to millions and severe penalties are in place for lack of compliance.

Losses can occur due to many reasons – theft, breakage/spoilage, administrative errors, supplier fraud, returns fraud, and more recently, organised crime and cybercrime.

For retail, it may be the case of high-end purchases using fraudulent credit cards, whilst for financial services, it may be criminals creating fraudulent bank accounts through which to launder money or use in other illicit ways.

A LexisNexis study into digital payment fraud found that all types of fraud have increased by an average of 37% over 2021-22. The study found that there has been a shift in the types of fraud to now include alternative payment methods, such as digital wallet payments and cryptocurrencies, along with a growing complexity of frauds being perpetrated. In the Asia-Pacific region, there has particularly been a surge in fake account registration fraud and scams such as phishing, smishing and vishing.

Businesses have implemented loss prevention initiatives in brick-and-mortar stores for decades, yet the same focus is less often applied to online fraud. According to the LexisNexis study, the major challenges for businesses centre on “privacy concerns, poor user experiences, technology implementation complexity and ineffective solutions.”

It’s also pointed out that customers are demanding increased payment options, but businesses don’t have the necessary security in place to protect customer data when transacting using these new payment methods.

The UK’s Justice Committee found that “a large volume of perpetrators are acting in whole or in part from foreign jurisdictions reducing the chance of successful prosecution. Furthermore, fraud offences are often enabled through third parties such as telecommunications, email and social media platforms.” This finding supports the claim that online fraud can be much more difficult to track and prosecute due to the disparate spread of perpetrators and the relative anonymity of the internet.

Overall, the LexisNexis survey found that 80% of respondents expect fraud risk to increase over the next 24 months due to emerging payment options and real-time payments becoming the norm. Businesses will therefore have to keep up with this risk by bolstering their fraud and loss prevention efforts.
As put by manager of fraud and identity strategy for LexisNexis Risk Solutions Pratik Choudhary, “with a strong fraud risk management and fraud monitoring capabilities, institutions… can reduce fraud losses, maintaining customer trust and safeguard their reputation, all while preparing for new regulations.”

Where Are We Headed with Fraud and Loss Prevention?

Luckily for businesses, and as with most problems of the modern world, we are seeing an increase in digital solutions for online fraud and loss prevention. These solutions can help businesses adapt their processes to overcome fraud challenges and augment traditional loss prevention tactics to counter online fraud.
In order to prevent fraud at the outset, many organisations in the Asia-Pacific region are turning to one-time passwords as a fraud prevention method, whilst in Europe and Latin America, they are prioritising biometric authentication. These methods are proving effective at deterring fraud but are not yet universal due to the cost of implementation and perceived disruption to the customer experience. Many businesses are therefore continuing to offer only static passwords and device verification.

Real-time Know Your Customer (KYC), Know Your Business (KYB) and Ultimate Beneficial Owner (UBO) technology is assisting businesses to manage and keep on top of a constantly changing regulatory environment.

Sanctions, regulations and cybercrime issues are always evolving hence it is vital for businesses to use the latest technology to ensure they remain compliant with the regulations of the day. It also requires businesses to have up-to-date screening data that is agile enough to adapt as circumstances change.

Businesses need to ensure they have reliable sources of information about fraud and loss in order to make informed business decisions and mitigate risk exposure. This is where behavioural analytics and machine learning can assist.

Machine learning techniques are particularly effective in preventing fraud in financial services where trends can be swiftly identified and flagged for investigation, whilst behavioural analytics provides business leaders with evidence-based macro trends that can be acted upon. When used appropriately, application of these technological solutions will be beneficial for organisations’ modelling, analytics, and governance efforts.

Let AsiaVerify Help You Meet Your Compliance Obligations

AsiaVerify is an expert regulation technology (RegTech) company helping businesses operating in the Asia-Pacific region to meet their regulatory and compliance requirements more effectively.

We specialise in offering market-leading KYC, KYB and UBO solutions to assist companies to satisfy their obligations with efficiency and precision through real-time searches and results.

Our technology also facilitates automatic language translation between local language and English in order to provide the most accurate results and minimise the level of manual intervention required.

AsiaVerify CEO Ficoal Dong and AsiaVerify Head of UK and Europe Joanna Wands will be attending the GRC World Forums’ #RISK 2022 Conference in the UK on 16 and 17 November to discuss the latest fraud and loss prevention initiatives and related compliance topics. Ficoal and Joanna would love to have a chat if you’re attending the conference.

If you’re not attending the conference but would like to understand how AsiaVerify can help your business to efficiently meet its regulatory and compliance requirements, reach out to AsiaVerify to speak to one of our multilingual regulatory experts.

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